Consumer Sector Continues Steady Growth While Oil Tumbles After Weekend Impasse

There exists no shortage of market-moving events to look forward to over the next two weeks, beginning with the FOMC’s two-day meeting kicking off tomorrow, October’s payroll data to be released on Friday, not to mention the US presidential election next Tuesday – which seems too close to call after Friday’s FBI-Clinton e-mail news.  Today’s economic data showed consumer spending increasing 0.5% in September, above expectations of 0.4% and an improvement over the 0.1% decline in the prior month.  The most recent release is the largest growth in three months, signaling a solid consumer sector, which represents roughly 70% of US economic activity. Personal income also reported a 0.3% increase, which was slightly below projections of +0.4%, but higher than August’s 0.2% advance.

Oil continued its slide today following an unsuccessful weekend meeting amongst representatives from various oil-producing nations.  On Saturday, officials from Azerbaijan, Brazil, Kazakhstan, Mexico, Oman and Russia joined OPEC members in Vienna with the intention to reach a joint commitment to cut production, however the gathering adjourned with no such resolution.  The lone tangible takeaway was that attendees agreed to meet again later next month, prior to the regularly scheduled OPEC meeting on November 30th.  Investors viewed the impasse as yet another detour to implementing the informal agreement that had been reached in September – prompting a 2.75%-3.75% tumble in oil prices, close to lows for the month.

In the Eurozone, data released today showed inflation rising to its highest level in over two years.  As the Eurozone economy expanded 0.3% in the third quarter, the consumer price index increased 0.5% for October, with the largest portion of the growth attributed to a 1.1% jump in service prices.  Despite the relatively strong data, it is still expected that the ECB will extend its current QE program, currently due to end in March.  Contributing to the expectation for future easing, earlier today Germany reported its lowest reading of retail sales in more than two years.  German retail sales in September fell 1.4% MoM compared to an expected gain of 0.2%, and 1.8% lower than September of 2015. 

All three major US stock indexes finished down 0%-0.1%, while Treasury yields/swap rates halted their recent steady climb and are down 1-3 bps across the curve on the day.  The selloff in oil has pushed WTI crude to $46.85/barrel and Brent crude down to $48.30/barrel.